Loan scheme - Initiative of charity must be praised

Many people faced with exceptional family events, down on their luck, or in dire need of money, feel that they have no choice but to borrow from moneylenders, loan sharks, or even use credit cards, because they cannot get the money through normal lending agencies.

It may seem like an easy way out, but they end up paying the money back at exorbitant rates of interest. The majority do not even realise that they may be paying up to 150% interest per annum.

A survey by the financial regulator a couple of years ago found that 80% of those who borrowed from moneylenders did not compare interest rates beforehand, and 71% did not even know the actual interest rate they were paying. Many are quite content with the service and have no problems meeting their repayments.

Those people may be contentedly naive, but their exploitation is nevertheless an outrage. We elect a government to protect society and it should be particularly mindful of protecting the most vulnerable. They have essentially been abandoned to the mercy of the moneylenders and loan sharks, many of whom are merciless in their methods.

The Cork branch of the St Vincent de Paul Society (SVP) found that getting into debt to moneylenders has become a scourge of the poor.

Therefore it has introduced a Loan Guarantee Scheme in which it acts as guarantor for people with bad credit histories to secure loans from credit unions at normal rates of interest. The scheme has been attracting national attention.

Other branches of SVP, the country’s largest charity, have been requesting details of how the pioneering loan scheme has been operating. While still in its early days, requests for details have come from across the country.

The charity acts as a go-between for people on low incomes to establish relationships with the credit unions. With its recommendation, people can circumvent the waiting lists in getting advice from the Money Advice and Budgeting Service, which in turns refers them to the credit union. In essence the scheme becomes a fast tracking for loans for people who would otherwise turn to moneylenders.

The scheme is already up and running and SVP has deposited €100,000 to back the scheme. The amounts of money involved are relatively modest. There have been some absurd requests from people for loans of €10,000 and €20,000, which the charity cannot guarantee. But many people who previously have borrowed from moneylenders are now considering the loan guarantee scheme.

SVP should be commended but this should not obscure the failings of the Government.

It seems that it has no difficulty recommending that millions and even billions be risked to back up the reckless bankers and property speculators, while shirking their responsibility to protect the poorer sections of society who are being exploited by the extortionist tactics of moneylenders.